Jurisdiction(s):
United Kingdom

NRB Will Trust funded by spousal loan note: UK IHT relevant property charges, loan interest treatment, and retrospective TRS registration/reporting

Published on: 03 July 2024

Published by a LexisNexis Private Client expert

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Article summary

See Q&A: In 2006, the deceased’s spouse set up a nil rate band trust (NRB) in his Will, funded by a £285k loan note issued by his wife. The loan note was the only paperwork and the trust was never registered on the Trust Registration Service (TRS). The deceased’s children want the trustees to appoint the value to their own children. Do charges under the relevant property regime arise for this trust? Should the trustees register the NRB trust on the TRS retrospectively and make disclosures to HMRC?

Relevant property trust charges

For the ten-year anniversary charge, the available nil rate band (NRB) forms part of a calculation to derive the effective rate (ER), which then sets the actual inheritance tax (IHT) rate applicable to the specific trust. The actual rate equals 30% of the ER. As the ER cannot exceed 20%, the highest actual rate is 6%. Accordingly, the calculation limits the potential charge to this ceiling in practice...

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